In a major development, the Karnataka government has issued a draft notification proposing a shift to an alcohol-by-volume (ABV) based excise duty regime, a move that could significantly alter how liquor and beer are taxed in the state.
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The new draft amendments to the Karnataka Excise Rules, 1968, were published in an official gazette, with changes proposed under the powers granted by the Karnataka Excise Act, 1965.
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A key feature of the draft amendment is the introduction of a term called 'Alcohol-in-Beverage (AIB)', which points to the alcohol content per litre in beverages.
This is quite significant as it means the foundation for taxing liquor and beer based on the volume of pure alcohol, a move that could do away the existing slab-based structure.
As part of the proposed amendment, excise duty for distilled spirits supplied to distributor licensees woudl be levied at Rs 1,000 per litre of pure alcohol, covering products manufactured within Karnataka, imported from other Indian states or imported from abroad. A similar Rs 1,000 per litre rate has been proposed for bottled beer supplied to distributors.
For retail supplies to defence and paramilitary canteens, the existing structure based on bulk litres and alcohol strength would continue, with beer duties remaining at Rs 12 per bulk litre for alcohol content up to 5% and Rs 20 per bulk litre for beer with alcohol content above 5% and up to 8%.
The draft also proposes revisions to Schedule D, which governs additional excise duty or additional countervailing duty. These revisions introduce detailed price-based slabs for spirits and beer, while also specifying rates per litre of pure alcohol, effectively blending price bands with alcohol-content-based taxation.
The state government said the draft will be taken up for consideration after the consultation period, and objections or suggestions can be submitted to the finance department. If implemented, the ABV-based regime would align Karnataka's excise structure more closely with alcohol-content taxation models used in several other markets, potentially reshaping pricing, consumption patterns and state excise revenue.
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